South Africa To Drop Dividend Tax On Foreign Subsidies

by Robert Lee, Tax-News.com, London

29 September 2003

The draft Revenue Laws Amendment Bill was published for public comment last week, and contains some positive changes to South African international tax laws, according to experts.

Probably the most significant change will be the elimination of tax on dividends declared by foreign subsidiaries. Dividend income will also no longer be taxed in the country where South African shareholders have a 'meaningful interest', which has been set at a minimum level of 25%.

The bill, which contains many of the measures set out in this year's budget also lays out tax incentives to encourage urban development. In designated zones, the construction of new buildings will attract a 20% write-off in the first year and 5% for the subsequent sixteen years.

Other measures announced by Finance Minister Trevor Manuel in his budget speech in February included raising the threshold for smaller firms qualifying for a lower rate of company tax from R3 million in revenue to R5 million, and a double deduction for the first R20,000 start-up costs of a new business. Also included was a four year accelerated write-off for capital expenditure relating to research and development in the field of applied natural sciences, and accelerated depreciation programs for manufacturing assets, whilst the maximum permissible offshore investment doubled to R1 billion.

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